TORONTO, Nov. 25, 2011 /CNW/ - After two consecutive quarters of
deterioration, Canada's housing affordability has improved modestly in
the third quarter, according to the latest Housing Trends and Affordability Report released today by RBC Economics. Heightened global economic uncertainty
has kept interest rates low, which has been a contributing factor to
housing becoming more affordable across the country.

"Elevated uncertainty relating to the European sovereign-debt crisis and
the downside risk for economic growth have contributed to keeping
interest rates at low levels," said Craig Wright, senior vice-president
and chief economist, RBC. "The lower interest rate environment - which
also includes mortgage rates - has played a part in slightly reducing
the costs of owning a home in Canada in the third quarter."

The RBC housing affordability measure captures the proportion of pre-tax
household income that would be needed to service the costs of owning a
specified category of home at going market values. During the third
quarter of 2011, measures for the national level fell for all housing
categories tracked by RBC (a fall represents an increase in
affordability).

Earlier this year, deterioration in affordability at the national level
was skewed by substantial increases in homeownership costs in Metro
Vancouver. In the third quarter, RBC measures in the majority of
provinces and cities experienced modest declines (less than 1
percentage point). More remarkable improvements materialized in a few
local markets across Canada, including Montreal (for two-storey homes
and detached bungalows), Manitoba (for two-storey homes), and Vancouver
(for detached bungalows).

"Housing affordability levels are quite good in most parts of Canada and
will pose little threat to overall housing demand," added Wright. "The
Vancouver area market continues to be a major exception, with sky-high
property values in upscale neighbourhoods making it both extremely
unaffordable and the most at risk of a downward correction."

Going forward, RBC forecasts that interest rates will remain
exceptionally low in Canada until mid-2012 and rise gradually after
that.

"We expect to see further slowing in the pace of home price increases
next year, as housing demand levels out," said Wright. "These factors
will set the stage for a period of relative stability in affordability
trends in Canada."

The RBC report indicates that the cost of owning a home at market value
remains close to historical norms in the majority of markets outside of
British Columbia, implying that local markets are, for the most part,
at worst, slightly 'unaffordable'. Affordability tensions emerged
earlier this year in Toronto, Ottawa and Montreal (particularly in
two-storey homes) and continue to be in a slightly uncomfortable range.

The RBC Housing Affordability Measure, which has been compiled since
1985, is based on the costs of owning a detached bungalow, a reasonable
property benchmark for the housing market in Canada. Alternative
housing types are also presented, including a standard two-storey home
and a standard condominium. The higher the reading, the more costly it
is to afford a home based on going market values. For example, an
affordability reading of 50 per cent means that homeownership costs,
including mortgage payments, utilities and property taxes, take up 50
per cent of a typical household's monthly pre-tax income.

Highlights from across Canada:

British Columbia: The combination of moderate declines in mortgage rates and softer prices
for some housing types made it slightly more affordable to own a home
in British Columbia in the third quarter. The RBC Affordability
measures for British Columbia decreased between 0.3 and 1.2 percentage
points in the quarter, but remain well above historical norms. The poor
affordability picture in British Columbia will continue to weigh on
local housing demand.

Vancouver continues to experience sky-high home prices, even though the
RBC affordability measures fell between 1.5 percentage points and 0.8
percentage points. Current market prices continue to weigh on local
homebuyers, as home ownership costs remain well above historical norms.

Alberta: Impressive gains in Alberta's economy contributed to a stronger
provincial housing market in the third quarter of this year. Home
resales and housing starts reached their highest levels in over a year,
thanks to renewed demand for housing in the province. RBC affordability
measures for Alberta remained mostly unchanged and the lowest among the
provinces in the third quarter.

Affordability measures in Calgary deteriorated slightly for most housing
types in the third quarter, rising between 0.2 and 0.5 percentage
points. Nonetheless, Calgary-area homebuyers continue to benefit from
attractive affordability, which remained the best among Canada's major
cities.

Saskatchewan: In the third quarter, there was widespread improvement in housing
affordability in Saskatchewan. RBC measures fell for all housing types
between 0.8 and 0.9 percentage points, reversing part of the increases
from the previous quarter. Home resales picked up significantly in the
province, with strong gains registered in Saskatoon and Regina. The
Saskatchewan housing market will continue to be well-supported by
strong economic growth in the coming year.

Manitoba: Housing affordability continues to be attractive in Manitoba, showing
some of the most significant improvements in the country in the third
quarter. The RBC measures for two-storey homes fell 1.5 percentage
points, while the measures for detached bungalows declined by 1.2 per
cent and for condominium apartments by 0.8 percentage points.
Homebuyers took advantage of the greater affordability in the third
quarter and boosted home resales by 5.3 per cent.

Ontario: Ontario's housing affordability experienced very little change in the
third quarter of 2011. Condominium apartments were the only housing
type to see any movement, with the RBC measure decreasing by a mere 0.1
percentage point. Affordability in Ontario stands just slightly worse
than the historical average in the province. Home resales in Ontario
increased at a robust 3.8 per cent rate. Market activity in Ontario is
balanced at the moment, and home prices are increasing at a steady yet
moderate pace. The number of homes for sale in Ontario is on the rise,
which will likely slow the pace of property appreciation in the period
ahead.

The Toronto area remains a sellers market even as RBC measures clearly
stand above long-term averages for the area. In the third quarter,
measures for Toronto were little changed, increasing by a mere 0.1
percentage point for detached bungalows, declining by 0.3 percentage
points for two-storey homes and staying flat for condominiums.

Ottawa measures decreased over all housing types in the third quarter
from 0.2 to 0.6 percentage points. The earlier cooling in market
activity in the area has almost entirely reversed in the latest period,
as home resales rebounded by eight per cent.

Quebec: RBC measures for Quebec declined between 0.1 and 1.4 percentage points,
reversing some of the back-to-back deteriorations in affordability seen
in the first and second quarters. All measures in Quebec stand slightly
above their long-term averages, and more so in the case of standard
two-storey homes, corresponding to a moderate strain in affordability
in the province.

Montreal's affordability measure for standard two-storey homes fell the
most among Canada's largest cities in the third quarter, dropping by
2.3 percentage points. The measure for detached bungalows also fell
substantially (by 1.3 percentage points), while condominium
affordability was largely unchanged (a marginal increase of 0.1
percentage points). Despite the improvement in the latest period, the
Montreal-area market still faces some stress, as affordability levels
continue to be somewhat worse than they have historically been, on
average.

Atlantic Canada: Atlantic Canada's housing market continues to be among the most
affordable in Canada, with further modest improvements in the third
quarter: the RBC measures eased between 0.4 and 0.6 percentage points.
Although many markets in New Brunswick have displayed signs of cooling
in the last two quarters amid deterioration in the province's labour
market, overall, home resales increased marginally in the region. With
slow economic growth projected in Atlantic Canada next year, housing
trends are likely to remain largely stable in the region.